will paying off a charge off improve score?

will paying off a charge off improve score?

My spouse has a Merrick Bank credit card account that charged off. It was on a hardship plan and somehow we missed a payment so they c/o. Anyway now we are paying Cardworks Servicing $28 a month for 36 months to settle the account. We're about a year into it. They continue to send offers to lump sum settle. My question is if we were to take a lump sum settlement and be done with it would that improve the score at all? Its currently reporting as charged off by Merrick with the current balance. Cardworks is not reporting. They say that once the account has been settled Merrick will report it as settled.

Re: will paying off a charge off improve score?

My understanding is: the CO is a major derogatory and is weighted the same by FICO whether it is PIF or not. However, a settlement is viewed as a negative - still, no diff in FICO scoring. I also understand that FICO basically uses the "CO" for scoring and does not refer to Bal/PIF/Settlement -- a more experienced could verify, please. Where it really comes into play is when a creditor manually reviews; the settlement would be more negative than a PIF. It would be weighted as: CO: PIF, CO: with bal, CO: settlement with settlement being the worse.

I would suggest paying in full or if you can do it, a PFD. If the PFD is not accepted I would PIF (whether via payments or lump sum) the GW then heck out of it for a removal of the CO and/or Tradeline.

Re: will paying off a charge off improve score?

ApexdvToo wrote:

My understanding is: the CO is a major derogatory and is weighted the same by FICO whether it is PIF or not. However, a settlement is viewed as a negative - still, no diff in FICO scoring. I also understand that FICO basically uses the "CO" for scoring and does not refer to Bal/PIF/Settlement -- a more experienced could verify, please. Where it really comes into play is when a creditor manually reviews; the settlement would be more negative than a PIF. It would be weighted as: CO: PIF, CO: with bal, CO: settlement with settlement being the worse.

I would suggest paying in full or if you can do it, a PFD. If the PFD is not accepted I would PIF (whether via payments or lump sum) the GW then heck out of it for a removal of the CO and/or Tradeline.

Let me explain my situation in hopes it may help you compare it to yours:

I have a charge off unpaid account that is 3 years old. This account still reports 90+ days late each month. Soooo.......if I pay, the creditor can not hit me with late payments anymore. But the amount owed is counting towards my utilization on my revolving credit. Thus by keeping my credit card balances at zero I look like I have a utilization of 7% due to the unpaid balance. If I pay, I will have a zero. Now, paying in my case may stop the recent deliquency category from reprting after a certain time. But I may have to carry an actual balance on my cards so that I have some sort of utilization reporting. The question is, from a return on investment perspective of the score, which is greater, paying or leaving alone?

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...

Re: will paying off a charge off improve score?

The impact, in my opinion, is far more than your FICO score. Not paying it, if they do a manual review, may be a show-stopper for any prospective creditor, regardless of your three digit score.

A CO is, in its initial reporting, a posting to all that not only have you been delinquent in your debt, but that your delinquency has reached the stage that, in the creditor's opinion, you are not going to pay. The accounting term is "uncollectible."

Paying can show them incorrect, and demonstrate that paying your obligated debt is important to you.

Not paying simply reinforces the negative observation made by that creditor.

Re: will paying off a charge off improve score?

The impact, in my opinion, is far more than your FICO score. Not paying it, if they do a manual review, may be a show-stopper for any prospective creditor, regardless of your three digit score.

A CO is, in its initial reporting, a posting to all that not only have you been delinquent in your debt, but that your delinquency has reached the stage that, in the creditor's opinion, you are not going to pay. The accounting term is "uncollectible."

Paying can show them incorrect, and demonstrate that paying your obligated debt is important to you.

Not paying simply reinforces the negative observation made by that creditor.

Being under a payment plan does offset that perception.....

Thats an interesting tone-of-thought you expressed. Allow me to ask you this, than what is the reasn for a three digit score in the first place? Paying this type of debt shows a lack of knowledge of the score. Not paying shows knowledge of the three digit score. Look man, I dont make the rules, I just try too live in them. I have lots of other obligations/debt that tells the real story. The scrore is used as qualification first than interest rate next. The score was part of "Regan Econocis" back in the 80's to stop bias in lending. If you ask me, this type of scoring amounts to nothing than Pegan Esoteric Tools. Numerology to be exact.

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...

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IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.